India's services sector expanded for a fifth straight month in December, though the growth pace was slower against the previous month, as demand rose but concerns over another wave of COVID-19 and inflationary pressures cast a shadow over the outlook. Services Purchasing Managers' Index , compiled by IHS Markit, eased to 55.5 in December from 58.1 in November, the lowest since September but still well above the 50-mark that separates growth from contraction. The Composite PMI Output Index slipped from 59.2 in November to 56.4, but remained above its long-run average of 53.9. Both manufacturing production and services activity rose at slower, albeit historically strong rates.
Underlying data suggested that the latest increase in new orders was centred on the domestic market, as new business from abroad fell further. December data showed renewed job shedding in the service economy, but the rate of contraction was only slight. Business confidence strengthened during December, to a four month high, but sentiment remained subdued in the context of historical data. Some firms foresee further improvements in demand and expect marketing efforts to bear fruit.
Aggregate new orders expanded for the fifth month running in December. The upturn was substantial, albeit the weakest since September. Manufacturers saw a stronger increase in sales than service providers. December data pointed to a broad-based decline in employment at goods producers and service providers. At the composite level, jobs decreased for the first time in four months. Business confidence improved among goods producers and service providers at the end of 2021. Levels of sentiment remained well below their respective averages.
